Blog /Growth Marketing

Simple Steps Towards AOV Optimization

19th Jun 2015 –

People are obsessed with numbers. This is especially true with businessmen.That’s why online merchants and marketers are constantly tracking all kinds of possible metrics and KPIs: traffic, conversion rate, cart abandonment rate, bounce rate, LTV, CPA, CTR, AOV, and so on and so forth.

There is an apparent reason for that – you need data to understand and manage your business successfully. But how do you prioritize the information you get? Many consider the traffic and its increase to be of top importance for their e-stores’ success. Others concentrate on their conversion rate first. But we’ll step back from those two and put the focus on AOV optimization.

Why should you optimize average order value? Here are just some of the reasons:

  • More reliable in revenue increase than traffic
  • Less expensive than customer acquisition
  • The fastest way to increase cash flow

Before getting to the practical ways of AOV optimization, let’s define our starting point and calculate average order value for the last three months. The basic AOV formula looks like this:

AOV = Sum of Revenue Generated / Number of Orders Taken.

But who would bother formulas when there is Google Analytics, right? (Conversions -> Ecommerce -> Overview) Now you have the number to ground on. So, let’s get down to the most interesting part, shall we?

#1. Free Shipping Threshold

Shipping is still one of the most common barriers that separates online customers from making a purchase. As a result, nearly half of shoppers abandon shopping carts if they see the shipping cost is too high. But there is a technique that allows, not only to decrease shopping cart abandonment rate, but to increase AOV: Free shipping on orders over a certain sum of money. Since nearly half of customers are ready to buy more to gain free shipping, they’ll keep throwing products into the cart until they reach the needed order value.

The main thing here is to define a threshold correctly. If your current average order value is $25, try to offer free shipping on orders over $40-50. Experiment and find the right balance to keep the threshold sum reachable yet able to cover the additional expenses without a significant profits cut.

#2. Product Bundles

Let’s say, a shopper has come to the store looking to buy a smartphone. Want to increase his or her spending? Take some headphones and bundle it up! Product bundles or packages that draw alongside a discount are a great way to increase AOV by leveraging a purchase into a bigger purchase. Most importantly – suggest pairings that will appeal to your customers.

You might also bundle a few products of the same category, (e.g. 3 sweaters, 5 T-Shirts, 2 pairs of jeans). A moderate 10-30% discount or an offer to “Buy 4 T-Shirts and get the 5th for free” would be enough to seduce your customers to spend more than they’ve intended to. While you’re selling more, shoppers feel like they are getting a bargain. It’s a win-win situation.

#3. Upsells and Cross-Sells

These techniques, exploited by many generations of traditional marketers, are perfect for increasing AOV. Upsell is used to make a customer spend more on a single product, and cross-sell is used to make a customer buy more products. Amazon is a master of this, earning more than 30% of its revenue in a result of upsell and cross-sell recommendations.

Here is an example of Amazon effectively using those techniques. If you search for an iPhone 5, alongside with the phone offer you’ll see a recommendation block on a product page suggesting to buy iPhone accessories. In such a way, it’s trying to cross-sell you some additional related products, such as cases, protection screens, headphones, etc. Moreover, Amazon displays a comparison section with neatly listed iPhone 5 16gb, iPhone 5 32gb and iPhone 5s characteristics. That’s nothing else but a very convincing upsell, as the reasons why you should spend an extra hundred, on a 5s model with a bigger internal memory storage, are clearly demonstrated.

#4. Limited Period Offer

Customers have skillfully mastered the technique of purchase procrastination. They would wait for “decades” for someone or something to nudge them to make a deal. That’s why you need to create a sense of urgency – it’s now or never! Flash sale is a great motivator for customers to accelerate their thinking processes and buy more and buy faster.

Knowing your offer will last only for a day or two, customers will pull out their wallets with greater desire. The thing is, many shoppers do actually wait for this very special moment to come, and when it’s there, they sweep the products off the shelves. It’s the fastest and most effective way to skyrocket AOV, but only for a limited period of time, of course. However, you should be careful with timing, and try not to abuse it – do not arrange flash sales more frequently than once in a quarter or so.

#5. Rewards Program

Rewards programs have become a natural part of our buying experience. They are so widespread that we might not even know the precise number of these programs we’re involved with. There is only one reason why that is so – rewards programs do really work, it can significantly increase AOV and turn customers into loyal ones.

The main principle of earning reward points is – the more money you spend, the more points you get. Thereby, in a pursuit of gratification, reward points collectors often spend more than they originally would. Most importantly, make the points worth it to gather and spend. Also, keep the rules simple and count every purchase. Otherwise, customers might get irritated with all the complexity.

Originally published June 19, 2015 - Updated December 14, 2020

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